Can I Combine Two Mortgages on Two Different Properties?

by David Rouse

Sufficent equity in one of the homes is required to combine mortgages.

It is possible to combine the mortgages from two properties into one mortgage. This would leave a large mortgage on one property and the other property mortgage-free. The challenge is having one property with enough equity to support the combined balance of the two mortgages. The new loan would be considered a cash-out refinance and likely have a higher interest rate and stricter lending guidelines.

1

Determine which property has sufficient equity for the two mortgages. Consider combining the loans on your primary home, if one of the properties is your primary residence. Mortgage lenders typically allow higher loan-to-value (LTV)-- the amount of the loan versus the home’s value--percentages on primary residences than they do for investment properties. Ideally, your LTV will not exceed 80 percent or you will be required to pay mortgage insurance as well.

2

Request mortgage quotes from multiple lenders in your area. Local banks, mortgage brokers and even the current mortgage companies are great places to get quotes. Just be sure you obtain more than one or two quotes. Compare these quotes with one another. Some companies may only allow smaller LTVs or require higher rates than the other lenders. You should closely compare all aspects of the loans, and not just the interest rate.

3

Ensure that the lender you choose knows you are paying off the loans from multiple properties. The loan officer will have to advise the title company that releases for all of the affected properties will be required. The title company or closing attorney will obtain the official payoff statement from the lenders outlining the balance of the mortgage, unpaid interest and any fees required to release the lien on the property.

4

Follow up with the county the paid-off home is in to ensure that the lien was released when the loan was paid off. The clerk and recorder in the county the home is located in maintains the records documenting when liens are placed and released. The clerk and recorder can let you know when the lien release was filed. Filing and recording the release may take a few weeks to fully process. As long as you keep a copy of the release, it should not be an issue.

Tip

Obtain quotes for refinancing all of the liens and keeping them on the separate properties, instead of combining them. While it may be nice to have a property free and clear, your overall payment may be lower if they stay separated.

Warning

Talk with your accountant about the tax consequences of combining the mortgages. If your investment property is now free and clear, this may make more of the rental income taxable. Look at the consequences completely before closing on any refinance.

About the Author

David Rouse, currently residing in Raleigh, N.C., has been writing and teaching home owners about the mortgage industry since 1997. Rouse has written training manuals for mortgage professionals and conducted informational first-time home-buyer seminars, providing make-sense answers for a long and confusing process. He studied at Western Kentucky University.

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